- The NZD finds buyers as Prefu sees a lower unemployment rate for the June quarter.
- NZD/USD jumps 20 pips to hit session highs above 0.6720.
- Risk-on could power stronger gains in the New Zealand currency.
The New Zealand dollar is drawing bids and pushing the NZD/USD pair with New Zealand's pre-election economic and fiscal update (Prefu) lowering the peak jobless rate forecast to 7.8% from 9.8% projected in the budget.
The pre-election update also revised the June quarter gross domestic product (GDP) forecast to -16% from the previous projection of -23.5%.
"The initial economic impact of COVID-19, while still large, has been less severe than anticipated in the Budget Update, with a faster-than-expected move down alert levels, and high-frequency activity indicators suggesting activity has picked up sooner than expected," the report said.
However, inflation is likely to remain low due to weaker commodity prices and a strong exchange rate, the report added. So far, however, markets have ignored the dismal inflation forecast.
The NZD/USD pair has risen from 0.6702 to 0.6722 on the pre-election update but remains well below Tuesday's high of 0.6737. However, that level could come into play during the day ahead if risk sentiment remains strong, keeping the safe-haven greenback under pressure.
The futures tied to the S&P 500 are currently trading flat. Analysts at JPMorgan believe the stock market pullback has ended, according to Bloomberg.
Technical levels
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